Would the government’s decision to increase the home size for middle income group (MIG) under the credit linked subsidy scheme help in clearing unsold stock and reviving demand in the realty sector?

A day before, the Ministry of Housing and Urban Development approved increasing the carpet area in the MIG-I category of CLSS from the existing 90 square metre to up to 120 square metre and increasing the carpet area in respect of MIG II category of CLSS from the existing 110 square metre to up to 150 square metre. The changes are effective from January 1, 2017.

According to builders’ body National Real Estate Development Council (NAREDCO), this move would bring the entire demand for affordable housing under the interest subvention scheme, accounting for almost 96% of the total demand for housing in the country.

Confederation of Real Estate Developers’ Associations of India (CREDAI), another Developer’s body feels the average middle class in smaller towns and cities would now be able to afford bigger and better quality homes than before.

The increase in threshold limit would not only enable the middle income group buyers to avail interest rate subvention under CLSS, but also dilute the impact for the lower strata of the society with lower ticket size and that the subsidies might be more effective, if restricted to EWS/LIG segment in the interest of inclusive goal of housing for all.

Prime minister on December 31 last year had announced the CLSS under the Housing for All 2022 (Urban) for people belonging to the MIG category, valid till the end of December this year. However, the government last month extended the validity of interest subsidy benefit by 15 more months till March 2019.

According to a leading Real Estate Finance Company, the fence sitters specially, who were delaying their home purchase, would now be given a further push.

Builders, meanwhile, would not only enjoy the general uptick in the market that, but would also accelerate the sale of housing units which were earlier missing out on a sizeable portion of the Middle Income Group audience.

Would this decision of government beside helping in clearing unsold stock, also encourage developers to launch new projects?

CLSS or Credit Link Subsidy Scheme was launched by the Ministry of Housing and Urban Development under the Housing for All 2022 Scheme, on 22nd March 2017, for the Middle Income Group, to provide them with subsidy wherein the equated monthly instalments of the homebuyers would be brought down on housing loans availed by the buyers in urban areas. Now in a bid to further simplify the process, the government has now approved increasing the carpet area in the MIG I category of CLSS from the existing 90 square metre to up to 120 square metre and increasing the carpet area in respect of MIG II category of CLSS from the existing 110 square metre to up to 150 square metre. These changes are effective from 1st January 2017. The government expects the increase in carpet area to enable the middle income category of individuals to have a wider choice in developers’ projects. The Government also stated that the increased carpet area would also give a boost to the sale of ready built flats in the affordable housing segment. Carpet area is the area enclosed within the walls, and is the actual area to lay the carpet. This area does not include the thickness of the inner walls. It is the actual used area of an apartment. Would this have more takers?

A recent study report of CREDAI, the real estate Developer’s body, revealed that the supply of affordable houses has increased by 27%. What is the factor that contributed towards this sector of housing? The answer is that the initiatives of the government, to boost its flagship programme, has lured many developers to offer its services to lower income and middle income group. Among the new launches, the Mumbai topped the list with a whopping 40% increase in housing supply, followed by Kolkatta and Pune. Mumbai witnessed the highest number of launches, at over 19400 new residential houses until September 2017, out of which affordable housing sector had a share of close to 10000 units registering a rise of 300%, when compared to the previous year. What is the reason for this enhanced growth rate in the affordable housing sector? The key to this is that the implementation of RERA and GST has boosted the confidence of home-buyers, who were swinging in a dilemma to buy a house. The enhanced confidence resulted in many enquiries for the right kind of properties in which witnessed good traction during the current festive season. So would we see more developers investing in this sector?

The recent research report of a real estate advisory company, in 2016 and the first quarter of 2017, residential projects including townships across the country have attracted an investment of over Rs 26,000 crore. Another research report reveals that residential properties in the Rs 35 lakh price bracket accounted for the majority of sales in at least four out of seven major Indian cities last year. The report further states that this is the new era for housing in the Indian real estate sector. It is a reflection of burgeoning buyers’ confidence in the wake of government reforms witnessed in the recent past. The centre’s focus on affordable housing and rate cuts are meant to encourage primary beneficiaries of the scheme lower income home-buyers. With RERA in place and GST already making an impact with its national roll out, the gloom, whatsoever, created by demonetisation is gone and the realty sector is showing clear signs of revival. Does this imply that this is the best time for buying or owning a dream home in India, particularly when the home loan rates are considerably low now and more particularly as the largest public sector bank in India has also reduced its home loan lending rates by 25 basis points, for loans upto Rs 30 lakh, to 8.35 per cent?

The Government of India had launched “Housing for All” in rural areas in November 2016 under which the government along with the Ministry of Housing and Urban Development proposes to provide an environment friendly and secure house to every rural household by 2022. The government had in June 2015 given its approval for “Housing For All, 2022” for urban areas which provided for rehabilitation of slum dwellers, promotion of affordable housing for weaker sections through credit-linked subsidy and subsidy for beneficiary-led individual house construction or enhancement.

The Ministry, in a bid to further fasten the programme stated that by 2020, 2 crores houses would be created in Rural Areas. According to the Ministry of Housing and Urban Development, a universal Affordable Housing scheme would give a big boost to the construction industry as 1.2 crore dwellings will be built in three years under urban component and another 1.02 crore units under its rural component by March 2019. The government had also announced a new PPP (Private Public Partnership) Policy for Affordable Housing that allows extending central assistance of up to Rs 2.50 lakh per house to be built by private builders even on private land, besides opening up immense potential for private investments in affordable housing projects on government land in urban areas.

The Minister for Housing and Urban Development in a meeting had stated that the private stake holders have to pitch in to meet the goal of the Housing for All 2022, which is aimed at providing affordable houses to the urban poor population of India, so that they could be profited by the incentives that the government offers for the creation of affordable houses. The infrastructure and the significantly contribute towards the growth of any country and hence participation of the private sector in the government launched programs could immensely benefit the country and that it would make it much more easier for the Developers to avail loans for projects. The Minister, whilst heralding the move by Central Government with regard to the implementation of RERA, criticised the state governments for tweaking the RERA rules to suit their needs. Would more Private Developers participate in the Housing For All 2022? Would more affordable houses be created with private public participation? Would government create more funds for the Developers to pitch in?

The Goods and Services Tax, which stood effective from 1st July 2017, is heralded by many as a landmark legislation in indirect taxation policy in India. The GST is said to eliminate the various tax barriers to create a singly uniform market with tax transparency and predictability, which would inturn improve the efficiency of the supply chain for housing. However, currently people are experiencing dislocation, but the same is stated to be only on a shorter run. Affordable housing got accorded with Infrastructure status, in the previous budget year, which has strong governmental support. The reinforcement for the affordable houses were not considered to be late. After the implementation of GST, it was expected that either the affordable housing would be kept out of the ambit of GST or it would be taxed in the lowest slab. It came as a very good news that GST has been kept been kept out of the ambit of GST, however other issues are cropping up in the housing sector, which requires the government’s immediate attention. The prices of houses have gone up post the tax reform, government is yet to find out ways of minimising the effect of this rise on the average Indian homebuyers. Would the Banks will further lower down on their lending rates, ensuring that the end payout remains the same in case of property purchases? Would the government take measures for the removal of stamp duty charges in order to lower the burden off the mid-segment buyers.

The Minister for Housing and Urban Poverty Alleviation has stated that the urban slums would not uprooted, but would be provided with all the basic amenities so as to enable them to access all the roads and potable and sanitation water and electricity connection. The government has reportedly, in order to achieve this has planned an in – situ rehabilitation of existing slums dwellers by using land as a resource for the participation of the private sector, wherein new multi-storied residential blocks could be constructed by the developers by clearing up space occupied by slum dwellers and thereby raise capital by monetising the value of the cleared land by constructing high-value real estate projects, since many slums are situated in prime areas, where the land and property value could appreciate. According to the Ministry, this could be a complete win – win situation whereby the slum dwellers would get a proper house in the same location, avoiding displacement and retaining the existing connections with healthcare and education for their families.

Would the government be successful in implementing this program? Would the Slum Dwellers be provided with better amenities for life? How about the Housing For All, 2022 scheme? Would the government achieve success in housing for all scheme without uprooting the slums?

The Ministry of Housing and Urban Development had directed its authorities to take stock of the ground reality and update the progress of the work every fortnight. Housing for All 2022, was introduced with the aim of providing affordable houses to the EWS and LIG groups in India by 2022. Under this scheme, the government has proposed to build around 2 crore houses approximately from a financial assistance from the Central Government. For achieving this, the Government had introduced various schemes and measures to implement the program to its fullest, one such being Credit Linked Subsidy scheme. The Ministry had directed the officials to quantify and measure the work and progress, so as to display its result to the people. The Ministry directed the officials to monitor the outcome of each mission such as Swach Bharath Mission, Atal Mission for Rejuvenation and Urban Transformation, affordable houses sanctioned under the Housing for All 2022 Mission. The ministry has approved about Rs 5 lakh crore investments and expenditure under new urban missions and also directed that the National Rental Housing Policy and the Model Tenancy Act, under consideration for long should be finalised at the earliest. Would this turn a reality?

The Trichy district administration has planned to construct 70000 houses as apartment and individual structures within 2022, with a view to provide affordable houses for all residents. The Tamil Nadu Slum Clearance Board, one of the stakeholders of the scheme, stated that the city required 24,000 apartment houses and 46,000 houses under the Beneficiary led Construction (BLC) . Under the Housing for All 2022, the construction of highest government provided residential houses is advancing at various places and stages in and around the city of Trichy. This would inturn benefit around 3200 residents from the Economically Weaker Section, who are without any dwelling unit. Each house will be constructed on 402.96 sqft at the estimated cost of Rs 32.31 crore on a total area of 73248.41 square feet approximately. 685 houses are ready already and would be handed over to the residents residing at damaged houses. The people without dwelling units could thereafter make use of the schemes which give full grant or subsidy for the construction of the houses. thus, the scheme would provide houses for those people without houses and would take care of the land titling. What about the durability of the houses, particularly when no contractors were involved? What about the quality of the construction?